Wednesday, February 03, 2010

The Irish housing market - another moment of truth?

I took a moment this week to update my ongoing tracker of asking prices in our area of Dublin, and staring at the graph that gets spat out by my figures every time I update them, a bit of a pattern seems to be starting to emerge.

As a disclaimer - you've got to be careful with patterns - too much staring and you see patterns everywhere, but this one does seem to be reasonably clear.

My figures are sorted by house size and street, so there's a trace on the line for every street in our area, and where there is more than one house size, an extra trace per street for each size of house too. So the actual graph spat out is a messy splatter, resembling a rats nest of cables... something like this:

So it seemed to me the longer I looked at this, that there was a fairly clear "stepping down" thing happening. I took the average of all the streets on a clean graph, and tried to get a "line of best fit" happening that would bring out the steps. In other words, could I find discrete sections where the price was quite stable, and discrete sections where it was plunging?

The totally unscientific messing about seems to reveal something like this:

up to Jan - Stable
Jan to Apr - Falling
Apr to Augt - Stable
Aug to Oct - Falling
Oct to Dec - Stable

Jan to May - Falling
May to Dec - Stable

Or in terms of the monthly length of the stages: falling (4), stable (5), falling (3), stable (3), falling (5), stable (7).

The falls are precipitous, and the stable sections are wobbly, but the pattern does seem to be there. Whether this indicates general human nature (when prices are dropping, you'd better undercut your selling neighbour if you want out fast), estate agent strategy (hold fire on price reduction every 2/3 months and test the market resistance to asking price) or something else altogether, I don't know.

What seems reasonably clear though is that every fall is ultimately arrested by at least a brief ledge - and every ledge for the last 2/3 years has eventually collapsed into another precipitous step down.

The question in my area now, therefore is - after a half-year of relative stability, is this something of a bottom - or another ledge?

The recent (2-year) record would suggest that after 6 months without a major fall, we're likely to find out soon...

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